January 30, 2021
Hello and welcome to Pipeline, where unlike the public markets, we cover the low-risk, low-return world of VC investing! This week: why every VC firm has a marketing partner, the power shift from VCs to founders that underlies this and why VC firms may now cut back marketing and other services for founders.
(Was this email forwarded to you? Subscribe here.)
The growth of marketing functions at VC firms over the past decade is a key indicator of the intense competition between VC firms. But beneath that, it's a broader story of the shift in power between startup founders and venture investors that has changed how tech companies are built. With the news of Andreessen Horowitz launching a media property, it's worth looking at how we got here, and what that means going forward.
When Andreessen Horowitz formed in 2009, few VC firms did media outreach and few had an in-house marketing person. That changed when a16z brought on Margit Wennmachers in 2010.
Meanwhile, and this has not been discussed as much, the VC startup market was changing.
VCs were no longer in the position of power, where startups had to trek down to Sand Hill Road and seek money from a room full of partners. Competition to invest in top deals was getting fiercer than ever. Startups now had so many options for funding, they could choose. So VCs had to build their brand.
Marc Andreessen and Ben Horowitz, both experienced tech founders, wanted to build something different when they started their firm.
Meanwhile, this power dynamic between founders and investors has continued to push ever more toward founders to this day — with even more capital options for founders — and that probably won't change unless there is a big market downturn. So venture firms are continuing to look for new ways to add value for entrepreneurs, which will drive more future changes in the industry and create more ways for founders to raise funding.
When a16z first jumped into the market, some firms grumbled about the tons of coverage it was getting.
But virtually every venture firm soon followed and hired a marketing partner, as the position became known. They also followed a16z and built out services teams in talent, business development and marketing. Why has marketing become critical for VC firms?
Now, the VC services trend may be changing as some firms start to quietly cut back on offerings for startups, whether through cuts or attrition. GV, for example, cut back last year. Kleiner Perkins hasn't replaced marketing chief Amanda Duckworth, who left last year. Beyond the pandemic, there are theories for why this is happening.
Meanwhile, the news that a16z is launching its own media entity is a continuation of its original strategy. The firm always valued "owned" media, writing blog posts, books and WSJ opinion pieces, and this is another example of that. While there is certainly more tension between the press and VCs/tech companies — the reasons for which require another column — the purported beef between a16z and the press, and the idea that this new media venture is a move to avoid critical press coverage, is overblown, in my humble opinion.
Chinese technology and innovation are shaping our lives and workplaces. We launched Protocol | China to give you the news, analysis and research on the people, power and politics of Chinese tech. We move beyond the day's headlines to tell you what's next at the intersection of technology, policy and business in the world's largest country.
Deena Shakir is a partner at Lux Capital, a venture firm investing in emerging tech that raised $1 billion across two funds in 2019. She was formerly a partner at GV, worked at Google, and while at the State Department helped launch President Obama's first Global Entrepreneurship Summit in 2010. Her Lux investments include H1, Shiru, Mos and Neo.tax.
What product or service are you totally, even irrationally, loyal to?
Google Home. One of my pandemic projects has been attempting to fully automate my household — or at the very least, my house. I have timers go off to remind the kids about dinnertime and bedtime, to automatically start my robot vacuum/mop after dinner, to turn on my bedroom lights and start playing NPR when I'm getting out of bed, to water my trees when it's dry out — and skip on rainy days — to turn on the patio lights at dusk. There may be a lot of chaos inside the house, but at least I've got the IoT on lockdown!
What's a secret obsession of yours that most people don't know about?
Fast food. My friends literally had a McNugget display for me at a surprise birthday dinner one year. I know, I know, I invest in health care and alternative proteins and am really into horticulture, don't @ me.
What problem do you want to see a startup solve?
A cure for cancer. And while we seek that moonshot, I will continue to invest in companies improving health outcomes and reducing risk for cancer and other debilitating diseases.
What company or startup sector is the most underrated right now?
Women's health! It shocks me how many investors still think it's a "niche market," despite representing 50% of the population and more than 80% of dollars spent in health care.
I'm digging a lot into fertility these days. There are so many challenges across the IVF journey, from sperm selection to embryo selection to misinformation. Lots of opportunity for innovation, especially the application of AI.
What's the biggest problem in venture and what needs to be done to solve it?
Bias. The "diversity" problem in VC is not a pipeline or talent issue; it is fundamentally about bias. I am passionate about addressing the challenges around biases in VC, and have written about efforts GPs and LPs can take to mitigate them.
Although 2020 was a record-setting year in terms of VC deals, the percentage of dollars going to women-founded companies dropped from the prior year. It doesn't help that the pandemic has had an outsized impact on women and under-represented minorities in general. Women — especially Black and Latinx women — are dropping out of the workforce at unprecedented rates. There is ample data that shows the greater ROI of investing in diverse founding teams and boards; it's better for the macro economy, scientific innovation and individual investors alike. And it starts with addressing the deep-rooted biases.